Buying property for son to live in - where to get advice?

Eassenav

Hello, 

My husband and I are looking to buy a property that our son will live in once he completes his studies later this year.  The idea is that he will eventually take ownership of this property once he is in a position to obtain a mortgage.  We would need in the first instance to take out a mortgage in order to buy the property and we have equity in our home as well as another property that we let out (we don't want to sell this property).

I realise that there are tax implications and there are various ways that we can purchase this property so we need to get financial advice to work out which would be the best way to do this.

My question is where do I find the appropriate person who would be able to help with this?

Many thanks for your help.  

Albermarle

A mortgage broker should be able to guide you maybe ?

RAS

Is this really the time to buy a house for your son?

If he's graduating this summer, he needs to be very flexible about where he lives over the next few years. Your plan risks trapping him in an area which isn't to his best advantage in terms of career progression, or incurring repeated legal and agency fees, or just ending up with you having to manage another rental.

Much better to wait a few years until he has more idea of his career direction and location?

_Penny_Dreadful

Eassenav said:

Hello, 

My husband and I are looking to buy a property that our son will live in once he completes his studies later this year.  The idea is that he will eventually take ownership of this property once he is in a position to obtain a mortgage.  We would need in the first instance to take out a mortgage in order to buy the property and we have equity in our home as well as another property that we let out (we don't want to sell this property).

I realise that there are tax implications and there are various ways that we can purchase this property so we need to get financial advice to work out which would be the best way to do this.

My question is where do I find the appropriate person who would be able to help with this?

Many thanks for your help.  

One for a mortgage broker. You’ll need a regulated BTL mortgage if you intend to let the property to your son or a second home mortgage if you don’t. You’ll also need mortgage broker advice if the deposit is coming from equity in one of your other properties. 

You’re setting yourself up for the higher rate of SDLT for the purchase, CGT when you dispose of the property and potentially income tax too if your son pays you rent. Is there a particular reason why you think buying the property for your son is the best way to financially help him get a property? As he’s about to embark on his career is it wise to tie him down to one geographical location? Would paying money into a LISA for him to use when he’s ready to buy make more sense? 

Eassenav

Thank you for your help with this. I will try the mortgage broker route first, I wasn't sure if they would understand and be able to advise on the tax implications.

I appreciate your comment on being flexible in location, but his circumstances mean that he needs a property in a particular area that is not local to us hence why we are looking at buying rather than spending more on rent. and it maybe something that he needs to rent out in the future but it is going to be an investment for him to benefit from in the future.

Brie

Would you / he consider having him on the mortgage from day 1?  just thinking this would save some of the CGT and stamp duty when you later shift percentage of ownership.  Whether it would be best to have this set up as joint tenants or tenants in common would need to be discussed.  As would having wills for all 3 of you to ensure that at any death the property moves towards your son as intended.  Down side might be that he will be using his FTB status earlier than he might intend.

Albermarle

 but it is going to be an investment for him to benefit from in the future.

Could also be a lot of hassle as well, if it does not go so smoothly.

Keep_pedalling

 RAS said:

Is this really the time to buy a house for your son?

If he's graduating this summer, he needs to be very flexible about where he lives over the next few years. Your plan risks trapping him in an area which isn't to his best advantage in terms of career progression, or incurring repeated legal and agency fees, or just ending up with you having to manage another rental.

Much better to wait a few years until he has more idea of his career direction and location?

Have to agree, this idea is nuts. Instead of taking on debt and and paying a large chunk of tax, why not put the money away you would be spending on this to gift him at a more appropriate time in the future. 

Green_hopeful

I did this for our youngest. I essentially lent him the money and we have a mortgage to protect my loan. I had some money myself and some that I borrowed from my mum. The advantage is that he could use his LISA and didn’t pay any stamp duty as he was a first time buyer. He and his girlfriend pay some money each month although it varies as he doesn’t earn much.  We just used a template private mortgage but I don’t think a conveyancer would take much time to write one. You might have some restrictions on what your mortgage company will lend you if you are hoping to remortgage your existing property. 

silvercar

Easiest would be for him to buy it as sole owner and you or your other half go on the mortgage with him. It’s called a ‘sole proprietor, dual borrower’ mortgage. I know Barclays offer them. That means the property is in his name, so no extra SDLT to pay, no CGT liability for you or your OH when the time comes to sell it.

Mgman1965

Mortgage lenders are unlikely to agree to a BLT mortgage if your renting to family (you will need a regulatedfamily BLT mortgage).

Also it can cause complications with tax as I believe  HMRC will tax you on the market rent, even if letting him stay rent-free, costing you more money.